Global ripple effect of sweeping US tariffs: uncertainty, instability

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By YIFAN XU in Washington (China Daily) 08:52, April 21, 2025

The global economic landscape faces profound uncertainty following the imposition of sweeping tariffs by the United States, a move that has already triggered retaliatory measures, market volatility, and warnings of severe disruption to international trade and supply chains.

The US policy shift, unveiled on April 2 under the banner of "Liberation Day", introduced a baseline 10 percent tariff, coupled with higher "reciprocal tariffs" targeting specific countries based on bilateral trade deficits. However, in a dramatic volte-face on April 9, the US announced a 90-day pause on the "reciprocal tariffs", claiming it needed time to negotiate deals with individual countries on the tariffs.

No such courtesy was extended to China, with the US escalating the tariffs on the nation's exports to 145 percent.

Major economies and international organizations have all expressed deep concern about the impact the tariffs will have on the global and domestic economies as the US pivots away from international trading norms.

China's commerce ministry quickly vowed countermeasures to "safeguard its own rights and interests."

The EU described the tariffs as a "major blow" and began preparing retaliatory steps. Japan's Prime Minister Shigeru Ishiba called the US move a "national crisis", while Australian Prime Minister Anthony Albanese criticized the baseline tariff as "completely unnecessary".

The tariffs have also injected a significant dose of unpredictability into the global economy.

"Uncertainty and volatility are undoubtedly contributing to a more cautious economic and business environment," World Bank President Ajay Banga recently told reporters, referring to market turbulence caused by the US tariff policy. He added this uncertainty would "certainly" lead to slower growth than previously expected.

Kristalina Georgieva, managing director of the International Monetary Fund, said a day after the tariffs were announced: "We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth."

By April 17, the eve of the Spring Meetings of the IMF and World Bank, Georgieva said that the trade tariff uncertainty was "literally off the charts".

"The world economy's resilience is being tested by the reboot of the global trading system that threatens to cause turbulence in financial markets," she said.

Poorest hit hardest

Fears of a tariff-induced global recession have raised concerns about the potential impact on the world's poorest people, and those at the bottom of the US socioeconomic ladder.

"I sincerely hope that we will have no recession, because a recession will have dramatic consequences, especially for the poorest people in the world," UN Secretary-General Antonio Guterres said on April 9.

Rebeca Grynspan, head of the UN Conference on Trade and Development, said in a statement to UN News that the 44 Least Developed Countries, contributing minimally to US trade deficits, should be exempt, as tariffs would worsen their debt crises.

"Our emphasis has been to put attention on what can happen to countries that are more vulnerable, such as the least developed countries, and small island developing states. What is happening to those countries is what really worries us," she said.

Tim Jones, head of policy at the UK-based Debt Justice campaign group, said on his blog that the tariffs will intensify the debt crisis in lower-income countries.

He also said that tariffs hit countries needing export earnings to service external debts, which are potentially compounded by currency fluctuations and rising borrowing costs.

A panel discussion, Global Responses to an American Reset of International Trade, was held at the Center for Asia Policy Studies at the Brookings Institution, Washington, DC, on April 14, with Mireya Solis, the center director calling the US tariffs "of utmost importance".

Shujiro Urata, a professor emeritus at Tokyo's Waseda University, told the panel fears of a recession loom large. The tariffs, he said, "would slow down the US economy, which was doing OK before this," with negative spillover effects for Japan, Europe, and other economies.

Urata warned the "regressive nature" of tariffs could also worsen income distribution in the US. A group of people in the United States who are not so rich maybe supported the policy for a better economy. But I think they are the ones, I'm afraid, who will be hurt most by this tariff, he said.

Solis said "American farmers are very worried about losing export markets abroad".

Sourabh Gupta, a senior fellow at the Institute for China-America Studies in Washington, told China Daily the US had opened a "real can of worms" and injected unpredictability into the international trading system. He said markets are "beginning to speak", and volatility has been a key feature.

At the Brookings event, Scott Kennedy, a senior adviser at the Center for Strategic and International Studies (CSIS), spoke of the tariff announcements impact on US markets.

You saw one of the reasons the US backed off last week is the huge negative-effect signal sent by the nation's stock markets, he said.